Finance Transformation remains alive, well, and relevant

Mark, an independent consultant with Talmix, has over 25 years’ experience advising executive management to achieve dramatic improvements in operational and financial performance. As a recognised specialist in the area of cross-functional business transformation, he has significant experience; business /process transformation, project management and change management. We spoke to Mark to learn more about his thoughts on finance transformation.

Finance transformation, and the broader back-office transformation, remains alive, well, and relevant. Nowhere is this more evident than in private equity where firms, facing lower price-to-earnings multiples on divestitures, are looking to squeeze additional costs and improve margins from their portfolio companies.

Finance transformation is the process of leveraging technology and streamlining/standardising end-to-end processes to improve efficiency and effectiveness. Transformation often involves working capital reductions, achieved by accelerating revenue collection, reducing inventory levels throughout the extended supply chain, and negotiating longer payment terms with suppliers. However, transformation is not merely about cost reduction and working capital improvement; a focus for many finance organisations is improving access to information in support of more-timely and informed decision-making. It can involve establishing strategic finance Centers of Excellence (“COE”) to ensure subject matter expertise is driven uniformly across the enterprise and best practices are adhered to.

Here are Mark’s top 3 things to focus on when looking at finance transformation:

Automation

Companies demanding rapid change increasingly apply automation to inefficient processes to quickly eliminate costs rather than rely on lengthy offshoring/outsourcing/shared services initiatives that often yield suboptimal results. Automation can be achieved through greater use of existing systems, (e.g., ERP, CRM, T&E, purchasing, general ledger accounting), or through the implementation of new technologies.

In complex technology environments, where multiple ERP instances challenge efforts to standardise and streamline processing, companies are employing Robotic Process Automation (“RPA”) to quickly bridge non-interfaced systems and eliminate manual effort. Targeted processing areas include account reconciliation, intercompany transactions, and new user system setup, amongst others. Artificial/ cognitive intelligence tools increasingly are being applied to higher-value activities (e.g., customer service and interactive voice response) to further improve service quality and reduce costs. Executive leadership must resist being overwhelmed by consultant-speak of “complex digital transformation”; these new technologies are extremely user-friendly and relatively easy to implement.

I recently worked with a global diversified technology and multi-industrial company in the early stage of integrating a multi-billion-dollar acquisition. The combined company, operating in more than 2,000 locations in 150 countries, wished to consolidate nearly a dozen finance centers to three regional shared services locations but was challenged by an extremely complex technology environment consisting of more than 200 ERP instances. The company had communicated synergy targets to The Street but could ill afford to wait for a system consolidation, which could take years to complete and millions of dollars of investment, in order to reduce costs. In turn, the company pursued a program of applying RPA to high-impact record-to-report, purchase-to-pay, and order-to-cash processes to bridge systems, eliminate manual effort, and reduce the number of positions that must be transitioned as part of the consolidation.

Business Intelligence tools

Business intelligence tools are being leveraged to transform higher-value analysis and reporting activities. Consider the case of a global bank’s financial planning and analysis COE operations in Singapore and Chennai. The company embarked on an extensive program to apply interactive data visualization tools and rigorous data management controls to effectively and rapidly compile and report valuable management information from broadly-distributed enterprise data. The initiative enabled the company to dramatically reduce labor costs, but more importantly, provided management valuable insights to customer-level product/service costs and profitability in support of more-timely and higher-quality business decision-making.

Critical success factors

A common question posed by executives tasked with transforming their operations is “what are the critical success factors and challenges to success”? Paramount is executive sponsorship of the initiative, commitment to targets, and a compelling case for change - all largely outside of the project team’s realm of control. Initiatives that lack executive mandate typically fall short of target owing to significant resistance from middle management.

Other critical success factors include implementing an effective change management and communications programme, allocating sufficient budget at programme outset to fund necessary investments (e.g., technology acquisition and implementation), and avoiding “political compromises” that produce suboptimal results. These factors generally can be managed by the transformation team.

All companies must periodically undertake transformational change or risk losing market advantage to competitors. Delay too long in deciding whether to transform and your competition will make the decision for you. Companies that proactively undertake these programs will place their competitors at a disadvantage.

If you are interested in Mark’s profile or consultants with similar experience, contact Talmix today and see how we can help solve your company’s business challenges. Talmix – the home of independent business talent.

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